The food delivery subsidy war has ended! Meituan sees profit recovery and valuation reassessment | In-depth analysis | Research report | Potential stock | Food delivery industry

Last week, the official website of the State Administration for Market Regulation reposted an article titled 'The Food Delivery War Should End,' which was interpreted by the industry as a sign of regulatory action against unhealthy competition. The nearly year-long food delivery subsidy war is likely coming to an end. The logic of industry competition will shift from capital-driven share grabbing to efficiency, service, and technology-driven healthy competition. The market leader with over 60% market share $MEITUAN-W (03690.HK)$ is the core beneficiary of this policy, with profitability reaching a turning point. Meituan-W (3690.HK)’s latest financial report shows that the company has maintained its leading position in the food delivery business with far lower losses than its peers, while revenue continues to grow steadily. New business initiatives and R&D investments are continuously being implemented, highlighting operational resilience. In the short term, the reduction in industry subsidies will directly lead to a contraction in the company's marketing expenses, and its core local commerce segment is expected to turn profitable quickly; in the long term, the company’s 'retail + technology' strategy continues to deepen, combined with the vast growth potential of the instant retail sector, reinforcing its core growth logic.

Regulatory guidance on the food delivery industry, financial reports confirm operational resilience – can Meituan kickstart a valuation recovery cycle?

Recent密集regulatory statements and targeted measures may put an end to the 'internally competitive' subsidy war in the food delivery industry that has persisted for over a year. Since 2025, with new players aggressively entering the market, China’s food delivery sector has been mired in capital-driven irrational competition. The cumulative subsidy across the entire industry has exceeded 100 billion yuan. Reckless low-price predatory pricing has not only severely squeezed profit margins for restaurant merchants but also trapped the industry in a vicious cycle of 'burning money for market share – losses leading to refinancing – increasing subsidies,' running counter to policies aimed at boosting real consumption and promoting high-quality development of the service sector. Against this backdrop, the national market regulation system has explicitly included rectifying 'internally competitive' practices as a core task for the year. Official media has also published consecutive articles setting the tone, potentially bringing an end to the industry's粗放competition model based on subsidies and shifting towards良性competition focused on operational efficiency, merchant services, user experience, and technological innovation. As the absolute leader in the food delivery market with a stable market share above 60%, $MEITUAN-W (03690.HK)$Meituan, with its deep moat built through years of accumulated merchant resources, a nationwide即时delivery network, and hundreds of millions of sticky users, stands as the primary beneficiary of this regulatory规范. Its profitability is expected to see a clear and certain修复拐点.

Last week $MEITUAN-W (03690.HK)$The latest disclosed Q4 2025 earnings report confirms the company’s solid strength and strategic resolve in navigating through extreme industry competition. Even amidst fierce price wars and peers significantly ramping up subsidies, $MEITUAN-W (03690.HK)$Meituan maintained a clear operational rhythm, sustaining its leadership壁垒in the core food delivery business with lower losses compared to competitors. Its market share in the food delivery sector remained firmly at the top throughout the year, with further巩固in its advantages in higher-priced dining segments. Financial data shows that the company’s Q4 revenue reached 92.1 billion yuan, a year-on-year increase of 4.1%, slightly above estimates of 92.08 billion yuan. Full-year revenue amounted to 364.85 billion yuan, maintaining a robust year-on-year growth of 8% despite significant industry pressure. The full-year net loss was 23.36 billion yuan, less than the market-estimated loss of 24.11 billion yuan. Moreover, the company did not收缩its long-term布局due to short-term industry competition. New business areas, particularly grocery retail and overseas market expansion, achieved breakthrough progress. Revenue from new businesses grew by 19% year-on-year, while R&D investment surged 23% to 26 billion yuan, achieving continuous落地in fields like AI model applications and unmanned delivery. This逆势growth成绩单fully demonstrates the company’s strong operational resilience and unwavering long-term strategic focus.

From an operational周期perspective,优化of the industry landscape will bring $MEITUAN-W (03690.HK)$Meituan both short- and long-term growth dividends. In the short term, as the industry-wide恶性subsidy退坡, the company’s previously increased marketing and subsidy expenses to应对price wars will rapidly收缩, with sales expense ratios expected to decline显著ly. The previously pressured core local commerce板块is set to experience rapid盈利修复, potentially扭亏为盈and释放 significant profit elasticity. In the long term, as the industry enters a new cycle of良性competition, $MEITUAN-W (03690.HK)$Meituan’s深耕'digital retail + technology' strategy will find broader room for发力. On one hand, China’s即时retail赛道remains in a phase of快速提升penetration, with product categories continuously expanding from food delivery into groceries, pharmaceuticals, daily necessities, beauty products, and more, providing ample ceiling for the company’s growth in a trillion-yuan market. On the other hand, the company’s持续加码in R&D will keep translating into improved operational efficiency and user experience. Coupled with steady海外市场expansion in regions like Southeast Asia, the company’s long-term growth逻辑will continue to be验证and强化, further巩固its龙头advantage during this new phase of high-quality industry development.

Figure 1:$MEITUAN-W (03690.HK)$Revenue Growth Trend

Source: Futubull

– Regulators Halt Food Delivery Price Wars: Fundamental Restructuring of Industry Competition

In March 2026, the food delivery industry faced stringent regulatory constraints, with hopes of ending cutthroat competition. On March 25, the official website of the State Administration for Market Regulation republished in full an editorial from the Economic Daily titled 'The Food Delivery Price Wars Must End,' sending a clear authoritative signal of regulatory intent: the frenzied subsidy battles in food delivery must come to a halt. This regulatory intervention is not an isolated action but part of a comprehensive policy constraint system: In December 2025, the national standard 'Basic Requirements for Food Delivery Platform Services Management' was officially implemented, explicitly prohibiting platforms from forcing merchants to participate in promotions, shifting operating costs, or unilaterally modifying product prices, thereby setting red lines for industry competition at the institutional level; In January 2026, the Office of the State Council Anti-Monopoly and Anti-Unfair Competition Committee launched an investigation into competitive conditions within the food delivery sector, addressing issues such as 'subsidy wars, price wars, and traffic control.' On March 23, 2026, the Beijing Municipal Market Supervision Bureau, together with multiple departments, summoned $MEITUAN-W (03690.HK)$Meituan, Ele.me, JD.com, and ten other platform companies, notifying them about problems related to hyper-competition and issuing 'Administrative Admonishment Letters,' demanding immediate rectification of behaviors infringing on merchants’ autonomous business rights. The State Administration for Market Regulation has stationed personnel within relevant platforms to conduct on-site investigations, utilizing algorithm audits and compliance checks to continuously apply regulatory pressure, ensuring irrational competition is fully eradicated.

Figure 2:$MEITUAN-W (03690.HK)$Revenue Growth Trends

Source: Official Website of the State Administration for Market Regulation

The nearly year-long food delivery subsidy war has significantly impacted the industry ecosystem and broader consumption environment, forming the core reason for regulatory intervention. This irrational price war has plunged the industry into a state of widespread losses, with Alibaba, Meituan, and JD.com collectively investing 80-100 billion yuan in subsidies in 2025, driving the entire industry into collective deficits. Meanwhile, the subsidy war has severely disrupted pricing structures in the catering industry, which accounts for nearly 30% of CPI weight as a stabilizing factor for consumer spending. This price war directly hindered overall consumption recovery, as platforms forced low-price promotions, squeezing merchant profit margins. Many catering businesses were compelled to sacrifice product quality and compress operational costs, trapping the entire industry in a vicious cycle of unsustainable practices. More critically, industry competition has deviated entirely from value creation, with platforms focusing all resources on price subsidies rather than upgrading service experiences, optimizing fulfillment efficiency, digitally empowering merchants, or building core competencies, contradicting central directives aimed at boosting consumption and promoting high-quality development of the real economy.$MEITUAN-W (03690.HK)$The three major platforms of JD have cumulatively invested subsidies amounting to 80 to 100 billion yuan, leading the entire industry into a collective loss predicament. At the same time, the subsidy war has severely impacted the pricing system of the catering industry. Catering, which accounts for nearly 30% of the CPI weight, has become a ballast for consumption; this price war has directly dragged down the overall pace of consumption recovery. The platforms' forced low-price promotions have severely compressed the profit margins of merchants, forcing many catering enterprises to sacrifice product quality and cut operational costs, plunging the entire industry into a vicious cycle of losing money while shouting for business. More critically, industry competition has completely deviated from the essence of value creation, with platforms focusing all resources on price subsidy battles rather than on core capability building such as upgrading service experiences, optimizing fulfillment efficiency, and empowering merchants through digitalization, which runs counter to the central government's deployment to boost consumption and promote high-quality development of the real economy.

The regulatory halt to subsidy wars will restructure competition rules in the food delivery industry. In the short term, this move will forcibly terminate the prisoner's dilemma where platforms feel pressured that they will fall behind if they do not offer subsidies, allowing all industry platforms to legally cease their bottomless subsidy investments. This will lead to a rapid contraction in overall sales expenses across the industry, with leading platforms being the first to see profit recovery. Among them, Meituan, the industry leader with the largest market share, holds the greatest potential for profitability. In the long term, the underlying competitive logic of the industry will shift completely from capital-intensive price wars to efficiency-driven value creation. The focus of competition will return to core value dimensions such as fulfillment speed, service experience, merchant empowerment, and supply chain capabilities. Leading platforms with end-to-end operational capabilities and deep ecosystem barriers will further solidify their competitive advantages, gradually transitioning the industry’s development pattern from previous disordered competition to a healthier and more sustainable stable competition.$MEITUAN-W (03690.HK)$As the leader, it possesses the greatest profit flexibility; in the long term, the underlying competitive logic of the industry will fully shift from "capital-consuming price wars" to "value-creating efficiency wars." The focus of competition will return to core value dimensions such as fulfillment timeliness, service experience, merchant empowerment, and supply chain capabilities. Leading platforms with comprehensive operational capabilities and strong ecological barriers will further consolidate their competitive advantages, and the overall development pattern of the industry is expected to gradually transition from the previous chaotic battles to a healthy and sustainable stable competition.

Figure 3: Comprehensive Political Work Joint Meeting Addressing Hyper-Competition

Source: CCTV News

– Meituan-W (3690.HK) Fundamental Strength: Resilience and Recovery Potential of Food Delivery Business

Despite the industry-wide food delivery subsidy war in 2025, which caused $MEITUAN-W (03690.HK)$ temporary fluctuations in market share for its food delivery business, its position as the industry leader has not fundamentally changed. The core fundamentals of its food delivery business continue to demonstrate strong operational resilience, serving as the key foundation for the company to navigate through industry cycles and benefit from regulatory policies.

In terms of market share, as of February 2026, $MEITUAN-W (03690.HK)$ Meituan, Alibaba (Ele.me/Taobao), and JD.com held market shares of 67%, 23%, and 10% respectively, largely unchanged from January data; in terms of daily order volume, their respective shares were 51%, 42%, and 7%, indicating overall stability in the industry landscape. This data shows that even during the most intense phase of price competition in the industry, $MEITUAN-W (03690.HK)$ Meituan maintained a stable daily order volume above 71 million, with no significant loss in core user consumption frequency or platform stickiness, fully demonstrating the shock resistance of its fundamental base.

$MEITUAN-W (03690.HK)$ After more than a decade深耕 in the food delivery sector, Meituan has built up core barriers and deep moats that are difficult for competitors to replicate in the short term. The company has established an instant fulfillment network covering 2,800 counties and cities nationwide, with the largest delivery rider team in the industry, maintaining an average delivery time of 34 minutes, forming a positive cycle of 'order density-rider density-merchant density'; by the third quarter of 2025, $MEITUAN-W (03690.HK)$ the number of annual transaction users exceeded 800 million, with over 10 million restaurant merchants on the platform, further forming an ecosystem loop of 'massive users-diverse merchants-higher order density,' laying a solid foundation for long-term growth in the food delivery business.

The regulatory halt of the industry's vicious subsidy wars has directly catalyzed the clearest path toward profitability for $MEITUAN-W (03690.HK)$ Meituan’s food delivery business, with a high degree of certainty and ample room for profit recovery. Its core recovery logic is clear and highly actionable, driving the food delivery business back onto a healthy, profitable growth track across multiple dimensions. Specifically, first is the significant contraction in sales expenses in Q4 2025. $MEITUAN-W (03690.HK)$ Sales and marketing expenses increased by 60.9% to RMB 102.9 billion, accounting for an increase of 9.2 percentage points to 28.2% of revenue, with the vast majority being defensive subsidies for the food delivery business. If irrational subsidies are completely phased out under regulatory constraints, a contraction in sales expenses alone could allow core local commerce to quickly turn losses into profits; followed by rapid improvement in per-order profitability. According to estimates, in Q3 2025 $MEITUAN-W (03690.HK)$ the per-order loss for food delivery was approximately RMB 2.6. After subsidy reductions, the per-order loss narrowed to around RMB 2 in Q4 2025. By Q2 2026, the food delivery business is expected to reach break-even, with the potential for significant profitability contribution for the full year. Meanwhile, regulations explicitly protecting merchants' right to independent pricing and prohibiting platforms from forcing promotions will significantly improve the platform-merchant relationship, increasing merchant retention and operational stability, thereby enhancing the sustainability of platform commission income and fundamentally avoiding the issue of continuously declining commission rates caused by price wars.

– The trillion-dollar instant retail sector: $MEITUAN-W (03690.HK)$ The second growth curve

Instant retail has become the fastest-growing segment in China's retail industry, with a trillion-dollar market size on the horizon, opening up $MEITUAN-W (03690.HK)$ a vast space for a second growth curve. According to calculations by the Academy of International Trade and Economic Cooperation (CAITEC), the instant retail market size is expected to reach RMB 971.4 billion in 2025, growing by 19.5% compared to 2024, far exceeding the overall growth levels of online retail and total retail sales of consumer goods during the same period. It is expected to officially surpass the RMB 1 trillion mark in 2026, with an average annual growth rate of 12.6% during the '15th Five-Year Plan' period, indicating extremely high long-term growth certainty for the industry.

Figure 4: Instant retail market size from 2018 to 2025 and forecast for the next five years

Data source: Ministry of Commerce

The core support for the industry's rapid growth comes from the comprehensive popularization of consumer mindset. After years of market cultivation, instant retail has evolved from initially serving as a supplementary channel meeting emergency consumer needs to becoming a mainstream method of daily consumption for residents. Consumption scenarios have quickly expanded from initial categories like dining and grocery to encompass all product categories including 3C electronics, cosmetics, maternal and infant products, home appliances, pharmaceuticals, and healthcare. According to relevant surveys by China Economic Net, the instant consumption mindset of 'everything delivered to your door' has been fully established among mainstream domestic consumer groups. In addition to deepening existing markets in higher-tier cities, lower-tier markets are becoming a core source of incremental growth for the instant retail industry, opening up new growth ceilings. Relevant data shows that by 2026, the instant retail scale in county-level markets is expected to exceed RMB 300 billion, accounting for over 30% of the overall market share. Meanwhile, $MEITUAN-W (03690.HK)$ Meituan, leveraging its fulfillment network and merchant resources accumulated through its food delivery business, has already completed preliminary layout and fulfillment coverage in county-level markets, gaining a significant first-mover advantage in this incremental track.

* $MEITUAN-W (03690.HK)$ Layout: Comprehensive scenario深耕, significant first-mover advantage

Facing trillion-level track opportunities, $MEITUAN-W (03690.HK)$ has long positioned instant retail as the company's long-term core strategy. Through years of continuous深耕 and comprehensive scenario layout, it has formed a leading competitive advantage in the industry. The company focuses on flash purchase business, supplemented by diverse formats such as Little Elephant Supermarket, brand flagship flash warehouse, and community flash warehouse, building an instant retail service system covering all categories and scenarios; as of Q2 2025, $MEITUAN-W (03690.HK)$ has partnered with various retailers to build 50,000 flash warehouses nationwide. In July 2025, the platform’s peak daily order volume for instant retail exceeded 150 million orders, with the flash purchase business seeing continuous growth in new users and transaction frequency among core users.

The comprehensive scenario layout also allows $MEITUAN-W (03690.HK)$ to firmly occupy the leading position in the instant retail track, with its market share advantage continuously consolidated. According to GMV statistics, in February 2026, $MEITUAN-W (03690.HK)$ 's market share in instant retail reached 51%, surpassing Alibaba Group's 42% and JD.com's 7%, forming an absolute leading advantage in the industry; particularly in core categories like grocery and pharmaceuticals, $MEITUAN-W (03690.HK)$ 's market share exceeds 60%, establishing an unshakable user perception advantage. While consolidating its core category strengths, $MEITUAN-W (03690.HK)$ continues to break through category boundaries, expanding from initial fast-moving consumer goods like groceries to high-value standardized product tracks such as 3C digital, cosmetics, maternal and infant products, sportswear, home appliances, and furniture. The expansion achievements are remarkable. During the '618' promotion period in 2025, sales of high-ticket items on the platform, including mobile phones, liquor, milk powder, and large and small home appliances, increased two-fold year-over-year; on the first day of the 'Double 11' event that same year, sales of the newly launched 'Brand Official Flagship Flash Warehouse' surged by 300%, further broadening $MEITUAN-W (03690.HK)$ 's growth space in instant retail.

The current instant retail track has formed $MEITUAN-W (03690.HK)$ , Alibaba, and JD.com as the three major competitors in the market landscape, while $MEITUAN-W (03690.HK)$ leverages its differentiated core advantages to maintain an active position in industry competition. Comparing the three platforms, $MEITUAN-W (03690.HK)$ 's core strengths lie in its nationwide instant fulfillment network, high-frequency local consumer engagement, comprehensive coverage of lower-tier markets, and an all-scenario merchant ecosystem, with weaknesses concentrated in standardized product supply chain capabilities and fresh food cold chain layout; Alibaba's core strength lies in Tmall brand supply and Taobao traffic support, while JD.com excels in 3C home appliance supply chains and self-operated systems, but both have clear shortcomings in terms of the density of their instant fulfillment networks and lower-tier market coverage. From the perspective of industry essence, the core of instant retail is 'local supply + instant fulfillment,' rather than traditional e-commerce’s 'national warehousing + next-day delivery.' $MEITUAN-W (03690.HK)$ With over a decade of experience in food delivery operations, the grid-based fulfillment network enables deliveries within 30 minutes to 1 hour, perfectly aligning with the core needs of instant retail—this represents a key competitive gap that rivals like Alibaba and JD.com will struggle to close in the short term.

Overall, $MEITUAN-W (03690.HK)$ 's revenue last year still demonstrated steady growth, though profitability was impacted by fierce price wars in the food delivery industry, resulting in a net loss of 23.4 billion yuan for the year, with its core local commerce segment also turning unprofitable. The main cause of losses was a significant increase in subsidies and marketing expenses. Even under the heavy pressure of industry competition, $MEITUAN-W (03690.HK)$ continues to hold over 60% of the food delivery market share. Its new business revenue and R&D investment have grown significantly against the trend, maintaining a stable core operating foundation, and its long-term growth logic remains unchanged. Looking ahead, we believe that after national regulatory intervention halts malicious competition, the focus of competition in the food delivery industry will shift entirely from 'price wars' to 'value wars,' with platforms competing on supply chain capabilities, merchant service abilities, delivery efficiency, and technological innovation. This industry trend aligns closely with $MEITUAN-W (03690.HK)$ 's long-standing 'retail + technology' strategy. $MEITUAN-W (03690.HK)$ 's years of accumulation in instant delivery networks, merchant digital services, and R&D will unleash greater advantages during the high-quality development phase of the industry. Overall, the company’s short-term profit recovery appears highly certain, with a clear long-term growth trajectory. Current valuations already reflect the pessimistic expectations of industry competition, and with regulation taking effect and profitability recovering, $MEITUAN-W (03690.HK)$ Valuation is expected to see a sustained recovery.

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